UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2018
Commission File Number: 001-14475
TELEFÔNICA BRASIL S.A.
(Exact name of registrant as specified in its charter)
TELEFONICA BRAZIL S.A.
(Translation of registrant’s name into English)
Av. Eng° Luís Carlos Berrini, 1376 - 28º andar
São Paulo, S.P.
Federative Republic of Brazil
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F |
X |
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Form 40-F |
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes |
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No |
X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes |
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No |
X |
TELEFÔNICA BRASIL S.A.
QUARTERLY INFORMATION
DECEMBER 31, 2017
(A free translation of the original in Portuguese)
1
Independent auditor's report
To the Board of Directors and Stockholders
Telefônica Brasil S.A.
Opinion
We have audited the accompanying parent company financial statements of Telefônica Brasil S.A. ("Company" or "Parent company"), which comprise the balance sheet as at December 31, 2017 and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, as well as the accompanying consolidated financial statements of Telefônica Brasil S.A. and its subsidiaries ("Consolidated"), which comprise the consolidated balance sheet as at December 31, 2017 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Telefônica Brasil S.A. and of Telefônica Brasil S.A. and its subsidiaries as at December 31, 2017, and the financial performance and cash flows for the year then ended, as well as the consolidated financial performance and cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the parent company and consolidated financial statements" section of our report. We are independent of the Company and its subsidiaries in accordance with the ethical requirements established in the Code of Professional Ethics and Professional Standards issued by the Brazilian Federal Accounting Council, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the parent company and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. |
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Why it is a key audit matter |
How the matter was addressed in the audit |
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Provision for tax and regulatory contingencies |
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The Company and its subsidiaries are parties to a number of judicial and administrative civil, labor, tax and regulatory proceedings which arise in the normal course of their activities (Notes 3 and 18 to the financial statements). With respect to these tax and regulatory areas, the Company and its subsidiaries, at December 31, 2017, present loss contingencies totaling R$ 44 billion and R$6.4 billion, respectively, of which R$ 3.5 billion and R$ 1.1 billion, respectively, had been provided for as management, supported by external legal counsel, believes the likelihood of loss to be probable.
Because of the complexity of the tax and regulatory environment, the significance of the amounts involved and the critical judgment required to estimate the likelihood of loss, any changes in perspectives and/or judgment may significantly affect the financial statements of the Company and its subsidiaries.
For these reasons, we focused on the calculation and disclosure of these contingencies during our audit. |
Our audit procedures included:
c) For the more significant contingencies, meeting with management to discuss and assess, with the support of our experts, when applicable, the Company’s basis of conclusion;
e) Understanding and assessing the principal internal controls over the contingency identification and registration/disclosure processes.
We have concluded that management has adequate internal controls and accounting policies, as well as supporting documentation, to provide a reasonable and consistent basis for its conclusions.
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Recognition of unbilled revenue
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The recognition of revenue obtained from telecommunication services is considered a significant inherent risk, because it involves complex billing systems, requiring the processing of large volumes of data across varied product portfolios, which contain pricing inputs from a number of marketing plans (Notes 3 and 23 to the financial statements).
Additionally, within this context, revenues are recognized on a monthly basis upon inflow of economic benefits and when there are the billed and unbilled revenues, arising from the services rendered between the billing date and the end of the month, being identified, processed, and recognized at the end of the service month. Unbilled revenue recorded in the month during which the services were rendered is reversed in the month subsequent to the effective billing month, and a new calculation for the measurement of unbilled revenue from services rendered during that month is made. This practice is repeated during the year.
We focused on this area during our audit because any inconsistency in the calculation of these estimates may significantly affect the financial statements of the Company and its subsidiaries. |
Our audit procedures included, among others:
d) Recalculating the estimate of revenue realized but not billed at the end of the year, and comparing these estimates with revenue effectively billed in the month after the closing;
f) Understanding and assessing the principal internal controls over the measurement and accounting recognition of unbilled revenue from services rendered.
We have established that the internal controls and the estimates used by management have applied a reasonable basis for the recognition of revenue, consistent with the information included in the financial statements. |
Internal control and information technology environment |
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The Company is engaged in the provision of telecommunications services and in the development of activities that are necessary or support the performance of such services. The services include: (i) Switched Fixed Telephone Service ("STFC"), (ii) Multimedia Communication Service ("SCM"), data communication, including broadband Internet); (iii) Personal Mobile Service ("SMP"); and (iv) Cable Television Network (Conditioned Access Service - "SEAC"), throughout Brazil, via concessions and authorizations, as established in the General Grant Plan ("PGO"). The Company is highly dependent on its information technology structure, which processes a considerable volume of transactions from its business operations. Because of the Company's history of acquisitions as well as the volume of the Company's transactions, its information technology structure comprises more than one technological platform, each with different processes and segregated controls, which require a robust internal control system. Management is required to closely monitor daily operations, including the follow-up and compilation of physical quantitative, financial, and fiscal information from the services rendered.
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With the support of our information technology experts, our audit procedures included the understanding and assessment of the information technology environment and the automated and manual controls over the application systems that are relevant to the preparation of the financial statement. The procedures carried out comprise the combination of testing of the principal controls (and, when necessary, compensatory control testing), the testing of information security components, of privileged management access and of segregation of duties, that impact the financial statements. We also tested the automated and manual accounting entries, using a sample defined based on specific criteria related to the control transgression risk. |
3
Other matters
Statements of value added
The parent company and consolidated statements of value added for the year ended December 31, 2017, prepared under the responsibility of the Company's management and presented as supplementary information for IFRS purposes, were submitted to audit procedures performed in conjunction with the audit of the financial statements of the Company and its subsidiaries. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in the Brazilian Technical Pronouncements Committee CPC 09 - "Statement of Value Added". In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement, and are consistent with the parent company and consolidated financial statements taken as a whole.
Prior-year information
The financial statements for the year ended December 31, 2016 were audited by another firm of independent auditors, whose report, dated February 17, 2017, expressed an unqualified opinion on those statements.
Other information accompanying the parent company and consolidated financial statements and the auditor's report
The Company's management is responsible for the other information that comprises the Management Report.
Our opinion on the parent company and consolidated financial statements does not cover the Management Report, and we do not express any form of audit conclusion thereon.
In connection with the audit of the parent company and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the parent company and consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management Report, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the parent company and consolidated financial statements
Management is responsible for the preparation and fair presentation of the parent company and consolidated financial statements in accordance with accounting practices adopted in Brazil and with the IFRS as issued by the IASB, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the parent company and consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the financial reporting process of the Company and its subsidiaries.
4
Auditor's responsibilities for the audit of the parent company and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the parent company and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the parent company and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal controls of the Company and its subsidiaries.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the parent company and consolidated financial statements, including the disclosures, and whether these financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
5
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
São Paulo, February 16, 2018
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Estela Maris Vieira de Souza
Contadora CRC 1RS046957/O-3
6
TELEFÔNICA BRASIL S.A. |
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Balance Sheets |
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At December 31, 2017 and 2016 (In thousands of reais) |
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Company |
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Consolidated |
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Company |
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Consolidated | |||||||||
ASSETS |
Note |
12.31.17 |
12.31.16 |
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12.31.17 |
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12.31.16 |
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LIABILITIES AND EQUITY |
Note |
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12.31.17 |
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12.31.16 |
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12.31.17 |
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12.31.16 | ||
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Current assets |
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16,668,039 |
17,482,265 |
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16,731,666 |
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18,398,995 |
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Current liabilities |
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18,819,861 |
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20,280,286 |
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17,862,531 |
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20,438,575 | ||
Cash and cash equivalents |
4 |
3,681,173 |
4,675,627 |
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4,050,338 |
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5,105,110 |
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Personnel, social charges and benefits |
14 |
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648,957 |
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746,798 |
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723,380 |
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760,643 | ||
Trade accounts receivable |
5 |
8,413,403 |
8,282,685 |
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8,588,466 |
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8,701,688 |
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Trade accounts payable |
15 |
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8,560,844 |
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7,539,395 |
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7,447,100 |
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7,611,246 | ||
Inventories |
6 |
324,711 |
368,151 |
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348,755 |
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410,413 |
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Taxes, charges and contributions |
16 |
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1,669,741 |
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1,698,334 |
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1,731,315 |
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1,770,731 | ||
Taxes recoverable |
7.a |
2,386,258 |
2,952,622 |
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2,563,990 |
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3,027,230 |
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Dividends and interest on equity |
17 |
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2,396,116 |
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2,195,031 |
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2,396,116 |
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2,195,031 | ||
Judicial deposits and garnishments |
8 |
324,465 |
302,349 |
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324,638 |
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302,424 |
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Provisions |
18 |
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1,434,911 |
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1,183,623 |
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1,434,911 |
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1,183,623 | ||
Prepaid expenses |
9 |
425,298 |
336,508 |
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446,439 |
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343,092 |
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Deferred revenue |
19 |
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370,493 |
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428,488 |
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372,561 |
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429,853 | ||
Dividends and interest on equity |
17 |
323,206 |
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- |
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- |
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Loans and financing |
20 |
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1,620,955 |
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2,542,975 |
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1,620,955 |
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2,542,975 | ||
Derivative financial instruments |
31 |
87,643 |
68,943 |
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87,643 |
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68,943 |
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Debentures |
20 |
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1,412,486 |
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2,120,504 |
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1,412,486 |
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2,120,504 | ||
Other assets |
10 |
701,882 |
495,380 |
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321,397 |
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440,095 |
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Derivative financial instruments |
31 |
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5,107 |
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183,212 |
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5,239 |
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183,212 | ||
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Other liabilities |
21 |
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700,251 |
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1,641,926 |
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718,468 |
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1,640,757 | ||
Noncurrent assets |
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85,495,114 |
84,475,240 |
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84,651,169 |
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83,667,264 |
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Long-term assets |
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Noncurrent liabilities |
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13,881,934 |
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12,432,800 |
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14,058,946 |
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12,383,265 | ||
Short-term investments pledged as collateral |
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81,472 |
78,153 |
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81,486 |
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78,166 |
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Personnel, social charges and benefits |
14 |
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21,648 |
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11,016 |
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23,284 |
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11,016 | ||
Trade accounts receivable |
5 |
167,682 |
200,537 |
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273,888 |
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305,411 |
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Trade accounts payable |
15 |
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- |
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71,907 |
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- |
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71,907 | ||
Taxes recoverable |
7.a |
740,104 |
474,240 |
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743,285 |
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476,844 |
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Taxes, charges and contributions |
16 |
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18,463 |
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20,996 |
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49,448 |
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49,131 | ||
Deferred taxes |
7.b |
- |
- |
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371,408 |
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27,497 |
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Deferred taxes |
7.b |
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709,325 |
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88,695 |
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709,325 |
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Judicial deposits and garnishments |
8 |
6,155,821 |
5,974,733 |
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6,339,167 |
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6,049,142 |
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Provisions |
18 |
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6,566,056 |
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6,591,493 |
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6,709,839 |
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6,625,638 | ||
Prepaid expenses |
9 |
21,684 |
35,340 |
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23,116 |
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36,430 |
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Deferred revenue |
19 |
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350,637 |
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511,786 |
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350,637 |
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511,786 | ||
Derivative financial instruments |
31 |
76,762 |
144,050 |
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76,762 |
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144,050 |
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Loans and financing |
20 |
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2,320,147 |
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3,126,792 |
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2,320,147 |
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3,126,792 | ||
Other assets |
10 |
86,345 |
53,363 |
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88,935 |
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55,565 |
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Debentures |
20 |
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3,108,253 |
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1,433,803 |
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3,108,253 |
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1,433,803 | ||
Investments |
11 |
1,949,276 |
1,407,155 |
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98,902 |
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85,745 |
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Derivative financial instruments |
31 |
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15,412 |
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1,404 |
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15,412 |
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1,404 | ||
Property, plant and equipment |
12 |
33,112,532 |
31,837,549 |
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33,222,316 |
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31,924,918 |
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Other liabilities |
21 |
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771,993 |
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574,908 |
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772,601 |
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551,788 | ||
Intangible assets |
13 |
43,103,436 |
44,270,120 |
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43,331,904 |
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44,483,496 |
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TOTAL LIABILITIES |
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32,701,795 |
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32,713,086 |
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31,921,477 |
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32,821,840 | ||
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Equity |
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69,461,358 |
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69,244,419 |
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69,461,358 |
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69,244,419 | ||
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Capital |
22 |
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63,571,416 |
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63,571,416 |
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63,571,416 |
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63,571,416 | ||
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Capital reserves |
22 |
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1,213,522 |
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1,272,581 |
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1,213,522 |
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1,272,581 | ||
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Income reserves |
22 |
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2,463,228 |
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2,474,974 |
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2,463,228 |
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2,474,974 | ||
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Other comprehensive income |
22 |
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21,328 |
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11,461 |
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21,328 |
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11,461 | ||
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Additional proposed dividends |
22 |
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2,191,864 |
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1,913,987 |
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2,191,864 |
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1,913,987 | ||
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TOTAL ASSETS |
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102,163,153 |
101,957,505 |
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101,382,835 |
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102,066,259 |
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TOTAL LIABILITIES AND EQUITY |
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102,163,153 |
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101,957,505 |
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101,382,835 |
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102,066,259 |
7
TELEFÔNICA BRASIL S.A. |
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Income Statements | |||||||||
Years ended December 31, 2017 and 2016 | |||||||||
(In thousands of reais, except earnings per share) | |||||||||
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Company |
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Consolidated | ||||
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Note |
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2017 |
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2016 |
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2017 |
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2016 |
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Net operating revenue |
23 |
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39,343,728 |
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38,625,395 |
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43,206,832 |
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42,508,459 |
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Cost of sales |
24 |
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(19,135,195) |
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(18,734,552) |
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(20,272,530) |
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(20,823,014) |
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Gross profit |
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20,208,533 |
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19,890,843 |
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22,934,302 |
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21,685,445 |
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Operating income (expenses) |
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(15,301,695) |
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(14,753,448) |
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(16,302,065) |
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(15,317,426) |
Selling expenses |
24 |
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(12,758,952) |
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(11,996,153) |
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(13,136,474) |
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(12,455,366) |
General and administrative expenses |
24 |
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(2,334,905) |
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(2,685,366) |
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(2,443,105) |
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(2,793,386) |
Other operating income |
25 |
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782,932 |
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939,516 |
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464,182 |
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968,479 |
Other operating expenses |
25 |
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(990,770) |
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(1,011,445) |
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(1,186,668) |
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(1,037,153) |
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Operating income |
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4,906,838 |
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5,137,395 |
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6,632,237 |
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6,368,019 |
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Financial income |
26 |
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1,675,172 |
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2,654,574 |
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1,755,958 |
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2,781,359 |
Financial expenses |
26 |
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(2,636,113) |
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(3,936,318) |
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(2,659,002) |
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(4,015,900) |
Equity pickup |
11 |
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1,303,484 |
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845,776 |
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1,580 |
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1,244 |
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Income before taxes |
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5,249,381 |
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4,701,427 |
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5,730,773 |
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5,134,722 |
|
|
|
|
|
|
|
|
|
|
Income and social contribution taxes |
27 |
|
(640,591) |
|
(616,185) |
|
(1,121,983) |
|
(1,049,480) |
|
|
|
|
|
|
|
|
|
|
Net income for the year |
|
|
4,608,790 |
|
4,085,242 |
|
4,608,790 |
|
4,085,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share (in R$) |
22 |
|
2.56 |
|
2.27 |
|
|
|
|
Basic and diluted earnings per preferred share (in R$) |
22 |
|
2.82 |
|
2.50 |
|
|
|
|
8
TELEFÔNICA BRASIL S.A.
Statements of Changes in Equity
Years ended December 31, 2017 and 2016
(In thousands of reais)
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
Capital reserves |
|
Income reserves |
|
|
|
|
|
|
|
| ||||||||
|
Capital |
|
Special goodwill reserve |
|
Other capital reserves |
|
Treasury shares |
|
Legal reserve |
|
Tax incentive reserve |
|
Expansion and modernization reserve |
|
Retained earnings |
|
Proposed additional dividends |
|
Other comprehensive income |
|
Total equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2015 |
63.571.416 |
|
63.074 |
|
1.297.295 |
|
(87.805) |
|
1.703.643 |
|
6.928 |
|
700.000 |
|
- |
|
1.287.223 |
|
25.468 |
|
68.567.242 |
Payment of additional dividend for 2015 |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(1.287.223) |
|
- |
|
(1.287.223) |
Prescribed equity instruments, including unclaimed dividends and interest on equity |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
221.559 |
|
- |
|
- |
|
221.559 |
Preferred shares delivered referring to the judicial process of expansion plan |
- |
|
- |
|
2 |
|
15 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
17 |
DIPJ adjustment - Tax incentives |
- |
|
- |
|
- |
|
- |
|
- |
|
10.141 |
|
- |
|
(10.141) |
|
- |
|
- |
|
- |
Other comprehensive income |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(156.266) |
|
- |
|
(14.007) |
|
(170.273) |
Net income for the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
4.085.242 |
|
- |
|
- |
|
4.085.242 |
Allocation of income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal reserve |
- |
|
- |
|
- |
|
- |
|
204.262 |
|
- |
|
- |
|
(204.262) |
|
- |
|
- |
|
- |
Interim interest on equity |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(2.172.145) |
|
- |
|
- |
|
(2.172.145) |
Reversal of expansion and Modernization Reserve |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(700.000) |
|
700.000 |
|
- |
|
- |
|
- |
Expansion and Modernization Reserve |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
550.000 |
|
(550.000) |
|
- |
|
- |
|
- |
Additional proposed dividends |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(1.913.987) |
|
1.913.987 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016 |
63.571.416 |
|
63.074 |
|
1.297.297 |
|
(87.790) |
|
1.907.905 |
|
17.069 |
|
550.000 |
|
(0) |
|
1.913.987 |
|
11.461 |
|
69.244.419 |
Payment of additional dividend for 2016 |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(1.913.987) |
|
- |
|
(1.913.987) |
Unclaimed dividends and interest on equity |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
101.778 |
|
- |
|
- |
|
101.778 |
Repurchase of preferred shares |
- |
|
- |
|
- |
|
(32) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(32) |
Preferred shares delivered referring to the judicial process of expansion plan |
- |
|
- |
|
- |
|
2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2 |
DIPJ adjustment - Tax incentives |
- |
|
- |
|
- |
|
- |
|
- |
|
10.815 |
|
- |
|
(10.815) |
|
- |
|
- |
|
- |
Other comprehensive income |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(113.811) |
|
- |
|
9.867 |
|
(103.944) |
Equity transactions (Note 1 c.1) |
- |
|
- |
|
(59.029) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(59.029) |
Net income for the year |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
4.608.790 |
|
- |
|
- |
|
4.608.790 |
Allocation of income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal reserve |
- |
|
- |
|
- |
|
- |
|
230.439 |
|
- |
|
- |
|
(230.439) |
|
- |
|
- |
|
- |
Interim interest on equity |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(2.416.639) |
|
- |
|
- |
|
(2.416.639) |
Reversal of expansion and Modernization Reserve |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(550.000) |
|
550.000 |
|
- |
|
- |
|
- |
Expansion and Modernization Reserve |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
297.000 |
|
(297.000) |
|
- |
|
- |
|
- |
Additional proposed dividends |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(2.191.864) |
|
2.191.864 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2017 |
63.571.416 |
|
63.074 |
|
1.238.268 |
|
(87.820) |
|
2.138.344 |
|
27.884 |
|
297.000 |
|
(0) |
|
2.191.864 |
|
21.328 |
|
69.461.358 |
9
TELEFÔNICA BRASIL S.A. |
|
|
|
|
|
|
|
|
| ||||||||
Consolidated Statements of Cash Flows |
|
|
|
|
|
|
| |
Years ended December 31, 2017 and 2016 |
|
|
|
|
|
|
|
|
(In thousands in reais) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Consolidated | ||||
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
5.249.381 |
|
4.701.427 |
|
5.730.773 |
|
5.134.722 |
Ajustement of: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
7.826.184 |
|
7.166.177 |
|
7.853.734 |
|
7.654.406 |
Foreign exchange on loans and derivative financial instruments |
|
60.237 |
|
75.075 |
|
57.832 |
|
75.075 |
Monetary losses |
|
536.891 |
|
632.120 |
|
543.852 |
|
620.570 |
Equity pickup |
|
(1.303.484) |
|
(845.776) |
|
(1.580) |
|
(1.244) |
Gains on write-off/sale of assets |
|
(74.619) |
|
(447.178) |
|
(74.337) |
|
(451.215) |
Provision for impairment - accounts receivable |
|
1.405.085 |
|
1.225.742 |
|
1.481.015 |
|
1.348.221 |
Change in liability provisions |
|
(58.423) |
|
214.016 |
|
(93.479) |
|
273.664 |
Write-off and reversals for impairment - inventories |
|
(45.109) |
|
(34.151) |
|
(45.089) |
|
(36.898) |
Pension plans and other post-retirement benefits |
|
30.877 |
|
5.962 |
|
31.511 |
|
5.243 |
Provisions for tax, civil, labor and regulatory contingencies |
|
990.770 |
|
953.003 |
|
999.419 |
|
985.176 |
Interest expense |
|
926.220 |
|
1.009.060 |
|
926.220 |
|
1.049.553 |
Decrease divestiture |
|
- |
|
(20.551) |
|
- |
|
(32.924) |
Decrease customer loyalty program |
|
(5.856) |
|
(39.683) |
|
(5.856) |
|
(39.683) |
Other |
|
(5.499) |
|
(3) |
|
(2.881) |
|
(3) |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
(1.502.948) |
|
(1.373.628) |
|
(1.274.181) |
|
(1.739.550) |
Inventories |
|
88.549 |
|
224.264 |
|
106.393 |
|
230.116 |
Taxes recoverable |
|
(338.754) |
|
(701.786) |
|
(330.398) |
|
(823.360) |
Prepaid expenses |
|
25.118 |
|
112.421 |
|
11.051 |
|
105.845 |
Other assets |
|
(244.434) |
|
92.839 |
|
82.109 |
|
23.202 |
Personnel, social charges and benefits |
|
(87.209) |
|
31.694 |
|
(42.830) |
|
53.005 |
Trade accounts payable |
|
1.217.264 |
|
(798.909) |
|
121.577 |
|
(707.998) |
Taxes, charges and contributions |
|
220.381 |
|
439.125 |
|
180.915 |
|
601.970 |
Other liabilities |
|
(2.078.311) |
|
(1.350.044) |
|
(2.065.631) |
|
(1.392.510) |
|
|
7.582.930 |
|
6.569.789 |
|
8.459.366 |
|
7.800.661 |
|
|
|
|
|
|
|
|
|
Cash generated from operations |
|
12.832.311 |
|
11.271.216 |
|
14.190.139 |
|
12.935.383 |
|
|
|
|
|
|
|
|
|
Interest paid |
|
(859.586) |
|
(886.156) |
|
(859.586) |
|
(926.223) |
Income and social contribution taxes paid |
|
- |
|
(199.605) |
|
(689.493) |
|
(568.335) |
|
|
|
|
|
|
|
|
|
Net cash (used in) generated by operating activities |
|
11.972.725 |
|
10.185.455 |
|
12.641.060 |
|
11.440.825 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Additions to PP&E, intangible assets and others |
|
(8.195.876) |
|
(6.828.200) |
|
(8.367.660) |
|
(7.470.869) |
Cash received from sale of PP&E items |
|
19.355 |
|
778.240 |
|
20.672 |
|
778.819 |
Cash paid for acquisition of companies |
|
- |
|
- |
|
(250.000) |
|
- |
Cash received from sale of investments |
|
- |
|
- |
|
31.804 |
|
- |
Redemption of (increase in) judicial deposits |
|
85.179 |
|
(183.845) |
|
83.500 |
|
(202.525) |
Dividends and interest on equity received |
|
384.588 |
|
767.554 |
|
- |
|
3 |
Cash and cash equivalents by incorporation |
|
- |
|
358.579 |
|
43.351 |
|
- |
Other |
|
111 |
|
- |
|
111 |
|
- |
|
|
|
|
|
|
|
|
|
Net cash (used in) generated by investing activities |
|
(7.706.643) |
|
(5.107.672) |
|
(8.438.222) |
|
(6.894.572) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Payment of loans, financing and debentures |
|
(4.485.495) |
|
(2.001.863) |
|
(4.485.495) |
|
(2.171.100) |
Loans and financing raised |
|
3.055.876 |
|
466.629 |
|
3.055.876 |
|
466.629 |
Received of derivative financial instruments |
|
104.214 |
|
132.410 |
|
107.846 |
|
132.410 |
Payment of derivative financial instruments |
|
(266.548) |
|
(239.379) |
|
(267.254) |
|
(239.379) |
Payment for reverse split of shares |
|
- |
|
(164) |
|
- |
|
(164) |
Dividend and interest on equity paid |
|
(3.668.551) |
|
(2.966.384) |
|
(3.668.551) |
|
(2.966.384) |
Treasury shares |
|
(32) |
|
- |
|
(32) |
|
- |
|
|
|
|
|
|
|
|
|
Net cash (used in) generated by financing activities |
|
(5.260.536) |
|
(4.608.751) |
|
(5.257.610) |
|
(4.777.988) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
(994.454) |
|
469.032 |
|
(1.054.772) |
|
(231.735) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year |
|
4.675.627 |
|
4.206.595 |
|
5.105.110 |
|
5.336.845 |
Cash and cash equivalents at end of the year |
|
3.681.173 |
|
4.675.627 |
|
4.050.338 |
|
5.105.110 |
10
TELEFÔNICA BRASIL S.A. |
|
|
|
|
|
|
|
|
|
Statements of Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
Years ended December 31, 2017 and 2016 |
|
|
|
|
|
|
|
|
|
(In thousands of reais) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Consolidated | ||||
|
Note |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income for the year |
|
|
4.608.790 |
|
4.085.242 |
|
4.608.790 |
|
4.085.242 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (losses) that may be reclassified into income (losses) in subsequent periods |
|
|
9.867 |
|
(14.007) |
|
9.867 |
|
(14.007) |
Unrealized gains ( losses) on investments available for sale |
11 |
|
338 |
|
83 |
|
338 |
|
83 |
Gains (losses) on derivative financial instruments |
31 |
|
(2.417) |
|
4.803 |
|
(2.417) |
|
4.803 |
Taxes |
|
|
707 |
|
(1.661) |
|
707 |
|
(1.661) |
|
|
|
|
|
|
|
|
|
|
Cumulative Translation Adjustments (CTA) on transactions in foreign currency |
11 |
|
11.239 |
|
(17.232) |
|
11.239 |
|
(17.232) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (losses) to be reclassified into income (losses) in subsequent periods |
|
|
(107.694) |
|
(156.186) |
|
(113.811) |
|
(156.266) |
Actuarial gains (losses) and limitation effect of the assets of surplus plan |
30 |
|
(163.174) |
|
(236.645) |
|
(171.296) |
|
(236.767) |
Taxes |
|
|
55.480 |
|
80.459 |
|
57.485 |
|
80.501 |
|
|
|
|
|
|
|
|
|
|
Interest in comprehensive income of subsidiaries |
11 |
|
(6.117) |
|
(80) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
(103.944) |
|
(170.273) |
|
(103.944) |
|
(170.273) |
|
|
|
|
|
|
|
|
|
|
Comprehensive income for the year |
|
|
4.504.846 |
|
3.914.969 |
|
4.504.846 |
|
3.914.969 |
11
TELEFÔNICA BRASIL S.A. |
|
|
|
|
|
|
|
|
Statements of Value Added |
|
|
|
|
|
|
|
|
Years ended December 31, 2017 and 2016 |
|
|
|
|
|
|
|
|
(In thousands in reais) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Consolidated | ||||
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Revenues |
|
55.205.339 |
|
53.004.204 |
|
58.937.750 |
|
57.732.738 |
Sale of goods and services |
|
54.919.544 |
|
53.209.390 |
|
59.265.466 |
|
57.897.521 |
Other revenues |
|
1.690.880 |
|
1.020.556 |
|
1.153.299 |
|
1.183.438 |
Provision for impairment of trade accounts receivable |
|
(1.405.085) |
|
(1.225.742) |
|
(1.481.015) |
|
(1.348.221) |
|
|
|
|
|
|
|
|
|
Inputs acquired from third parties |
|
(18.696.568) |
|
(18.491.586) |
|
(19.942.270) |
|
(20.418.608) |
Cost of goods and products sold and services rendered |
|
(9.316.305) |
|
(9.919.037) |
|
(10.412.308) |
|
(11.611.718) |
Materials, electric energy, third-party services and other expenses |
|
(9.499.989) |
|
(9.033.230) |
|
(9.648.698) |
|
(9.273.974) |
Loss/recovery of assets |
|
119.726 |
|
460.681 |
|
118.736 |
|
467.084 |
|
|
|
|
|
|
|
|
|
Gross value added |
|
36.508.771 |
|
34.512.618 |
|
38.995.480 |
|
37.314.130 |
|
|
|
|
|
|
|
|
|
Withholdings |
|
(7.826.184) |
|
(7.166.177) |
|
(7.853.734) |
|
(7.654.406) |
Depreciation and amortization |
|
(7.826.184) |
|
(7.166.177) |
|
(7.853.734) |
|
(7.654.406) |
|
|
|
|
|
|
|
|
|
Net value added produced |
|
28.682.587 |
|
27.346.441 |
|
31.141.746 |
|
29.659.724 |
|
|
|
|
|
|
|
|
|
Value added received in transfer |
|
2.978.656 |
|
3.500.350 |
|
1.757.538 |
|
2.782.603 |
Equity pickup |
|
1.303.484 |
|
845.776 |
|
1.580 |
|
1.244 |
Financial income |
|
1.675.172 |
|
2.654.574 |
|
1.755.958 |
|
2.781.359 |
|
|
|
|
|
|
|
|
|
Total undistributed value added |
|
31.661.243 |
|
30.846.791 |
|
32.899.284 |
|
32.442.327 |
|
|
|
|
|
|
|
|
|
Distribution of value added |
|
(31.661.243) |
|
(30.846.791) |
|
(32.899.284) |
|
(32.442.327) |
|
|
|
|
|
|
|
|
|
Personnel,social charges and benefits |
|
(3.783.519) |
|
(3.989.707) |
|
(4.107.176) |
|
(4.328.985) |
Direct compensation |
|
(2.601.425) |
|
(2.723.511) |
|
(2.803.226) |
|
(2.961.166) |
Benefits |
|
(996.215) |
|
(1.081.627) |
|
(1.101.174) |
|
(1.167.746) |
Unemployment Compensation Fund (FGTS) |
|
(185.879) |
|
(184.569) |
|
(202.776) |
|
(200.073) |
Taxes, charges and contributions |
|
(17.824.012) |
|
(16.413.347) |
|